Intellectual property rights and licensing: An econometric investigation

Licensing has been virtually ignored in the econometric literature on intellectual property rights (IPRs). We discuss theoretical effects of IPRs on decisions to license technology internationally. Based on a theoretical model we specify a reduced-form econometric equation relating the volume of U.S. licensing to measures of technology protection and other variables in licensee nations. The model is applied to data for 23 countries in a panel covering 1985, 1990, and 1995. The results indicate that countries with stronger patent rights attract larger arm's-length volumes of licensed technology, though we are unable to distinguish between licensing quantities and values.